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This article reviews the theoretical literature on digital piracy. It explains the reasons for intellectual property protection, a few facts about copyright protection, and the reasons to become a digital pirate. The recent changes in copyright law have been actuated by the emergence of digital technologies and the Internet. The influences of end-user piracy on firms' profits and strategies are investigated. Piracy could enhance welfare in the short and long run due to sampling, network effects, and indirect appropriation. The interactions between copyright holders under the threat of piracy...

This article reviews the theoretical literature on digital piracy. It explains the reasons for intellectual property protection, a few facts about copyright protection, and the reasons to become a digital pirate. The recent changes in copyright law have been actuated by the emergence of digital technologies and the Internet. The influences of end-user piracy on firms' profits and strategies are investigated. Piracy could enhance welfare in the short and long run due to sampling, network effects, and indirect appropriation. The interactions between copyright holders under the threat of piracy yield surprising welfare implications. Although commercial piracy is a major concern to the producers of digital products, mainly in developing countries, it has received little attention in the economics literature. Competition may significantly change copyright holders' strategies towards piracy compared to what can be drawn from the basic monopoly approach.